Also known as: buyers in the ordinary course of business · BIOC · buyer in ordinary course
Written by attorneys — see sources below.
A person who buys goods in good faith without knowledge that the sale violates the rights of another person in the goods and in the ordinary course from a person other than a pawnbroker in the business of selling goods of that kind. The buyer must take possession or have a right to recover the goods. Such a buyer takes free of a security interest created by the seller even if the interest is perfected.
NovaTech Electronics purchased forty high-end laptops for cash from CodeWave Consulting. CodeWave regularly advertised and sold its demo laptops each quarter in the same manner. NovaTech took immediate possession with no knowledge of any lender claim. The bank holding a perfected security interest in CodeWave's equipment cannot recover the laptops from NovaTech.
Luxe Loft bought forty designer handbags on unsecured credit from Metro Merch at a mall kiosk. Metro Merch usually wholesales handbags to retailers and conducted the kiosk sales exclusively by appointment during a two-week promotion. Luxe Loft inspected samples, negotiated a standard wholesale price, and took immediate possession without knowledge of Bella Brand's retained title. Luxe Loft qualifies as a buyer in the ordinary course of business.
A collector purchased a painting from an art dealer who had received the work on consignment. The collector bought in good faith, paid value, and took possession without knowledge that the painting had been stolen years earlier. The dealer regularly sold works of that kind to the public. The collector acquires good title against the original owner.
Georgia O'Keeffe, a renowned artist, had three paintings stolen from An American Place gallery in New York in March 1946. The gallery was operated by her husband Alfred Stieglitz. The paintings subject to this action are "Seaweed" and "Cliffs," with a third painting "Fragments" also missing. O'Keeffe did not report the theft to the police or advertise the loss, though she discussed it with associates. Stieglitz died in the summer of 1946. In 1947 O'Keeffe retained Doris Bry to help settle the estate. Bry urged reporting the loss, but O'Keeffe declined. In 1972, O'Keeffe authorized Bry to report the theft to the Art Dealers Association of America, Inc., which maintains a registry of stolen paintings. In September 1975, O'Keeffe learned that the paintings were in the Andrew Crispo Gallery in New York on consignment from Bernard Danenberg Galleries. On February 11, 1976, O'Keeffe discovered that Ulrich A. Frank had sold the paintings to Barry Snyder for $35,000. She demanded their return, but Snyder refused. O'Keeffe filed her complaint for replevin in March 1976 against Snyder, who impleaded Frank as a third-party defendant. The trial court granted summary judgment to Snyder on the ground that the action was barred by the six-year statute of limitations. The Appellate Division reversed and entered judgment for O'Keeffe. The Supreme Court of New Jersey granted certification to consider the issues. Frank traces his possession of the paintings to his father, Dr. Frank, who died in 1968, claiming to have seen them in his father's apartment as early as 1941-1943. Snyder purchased the paintings from Frank in 1975. There are factual disputes regarding the circumstances of the paintings' disappearance and acquisition.
View caseNo. The definition expressly allows purchase for cash, by exchange of other property, or on secured or unsecured credit.
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No. The seller need only be in the business of selling goods of that kind, which can include a wholesaler, manufacturer disposing of surplus equipment, or a firm with a regular sideline sales practice.
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No. The buyer may know of the security interest. The disqualifying knowledge is actual knowledge that the particular sale violates the secured party's rights.
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The buyer fails to qualify. The transaction must comport with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices.
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Yes. The buyer also takes free of an unperfected security interest when the other definitional elements are satisfied.
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